PART A – QUALITY CONTROL ISSUES AS (3.3) Apply business knowledge to address a complex problem in a given global business context

A business offers a quality product ~ a good or service ~ when it is fit for purpose and it meets or exceeds customer expectations. To ensure that the goods and services available for sale are of the highest quality, a firm may adopt a quality control or a quality assurance process.

Under Quality Control, finished products are checked by ‘quality controllers’ or ‘quality inspectors’ so that poor quality products can be identified before they are sold to consumers. In contrast, Quality Assurance involves all employees being responsible for quality standards and targets at each stage of the production process.

High quality makes money but also costs money. Products that meet customer expectations at a cost that is equal to or lower than the competition, attract more business. Quality is important for two main reasons: reputation and costs.

REPUTATION Customers base most of their purchasing decisions on price and/or quality, and sometimes on other factors such as after-sales service. The reputation of a business therefore depends on these factors and it is often quality that leaves the longest-lasting impression. Customers often complain about the poor quality of the products and services they buy. Conversely, a positive recommendation by a customer helps to develop a positive reputation for quality.

Widespread use of the internet and social media sites have made it very easy for happy or disgruntled customers make their feelings known about their experiences at restaurants, hotels or with shop service.

A good quality product/service can therefore provide a competitive edge over rivals and can lead to significant marketing advantages. For example, a business will benefit from repeat purchases and a longer life cycle for its product. It may also be able to charge a higher price and so further boost revenue.

COSTS OF QUALITY O Prevention Costs These are the investments made to improve quality. They include staff training, wastage during the product testing stage, possible re-working to improve the product, wage costs during the trials/testing stage, time allowance for quality assurance, etc. Prevention costs are worth the investment in order to lower failure costs.

O External ~ the following costs can be measured: customer returns, replacements, claims on warranties, product recalls. O Hidden external costs that cannot be measured with accuracy ~ lost sales and lost customers, failure outside of warranty period, time spent processing customer complaints, cost to the customer of servicing, cost of running the customer service department.

Hidden internal costs that cannot be measured with accuracy ~ delays, downtime, shortages, interruptions to production schedule while replacements are made or repairs carried out, management time dealing with complaints, loss of reputation.

MEASURES OF EFFICIENCY A business should constantly be trying to improve its efficiency. This will boost the capacity of the firm, meaning how much it can produce during a specific period of time. There are several ways to measure efficiency.

O Productivity This measures the relationship between inputs into the production process and the resulting outputs. For example, a furniture factory produces 100 beds per month and employs 20 workers. The labour productivity is five beds per person per month.

O Stock levels A firm will have set itself a target stock level of finished goods that it should achieve. The target is calculated to satisfy the demand expected by the marketing department plans, and based on what the production department thinks they can produce. If the stock level falls below the target, the productive efficiency has reduced because the output per worker has not met the planned requirements.

O Idle (or non-productive) resources The following would be signs of inefficiency in production: employees are O often left with nothing to do, machines are only used for some of the O available production shift, some resources are not in constant use.

O Poor quality There are many measures of poor quality including: customer complaints, faulty products rejected by quality controllers, customer returns of faulty goods.

IMPROVING EFFICIENCY Measures include: 1. Training the workforce Employees are often unproductive because they lack the skills or experience to work effectively. It costs money to up-skill employees. It may be necessary to bring expert trainers into the business or send workers off to courses. Productive time will be lost while employees are being trained. However, this increase in cost should be more than offset in the long term by improvement in the workers’ productivity levels.

2. Improving motivation A motivated workforce will work harder and take pride in their work. When employees feel valued, respected and adequately rewarded, they are likely to be more productive. Rewards might be tangible, for example, higher wage rates or bonus schemes, or intangible, for example, the provision of leisure facilities or family-friendly hours.

3. Investing in capital equipment Many work processes traditionally performed by people can now be effectively undertaken by automated/computerised systems. By reducing the labour input into production, a given level of output can be achieved for a lower labour cost.

4. Measuring performance and setting targets There is a saying, “what gets measured, gets done”. If employees and management are focused on the desired level of productivity, they may be more likely to act and make decisions that are consistent with achieving the productivity targets. The targets need to be realistic and attainable or they may demotivate workers, leading to poorer quality and customer service.